Suspend Aid to Egypt Now

By the Editors -
Jul 29, 2013

When Egyptian police opened fire on
protesters in Cairo over the weekend, they ended not only scores
of lives but also any chance of a peaceful resolution to Egypt’s
burgeoning civil war. They also further exposed the Barack Obama
administration’s hypocritical policy of maintaining aid to the
regime, despite U.S. law requiring a suspension.

The day before the killings, the administration had
declared that it would circumvent the law, which mandates a
cutoff of aid to any country whose legitimately elected leader
is overthrown in a military coup. The U.S. would not determine
whether the Egyptian military’s coup against legitimately
elected President Mohamed Mursi was what it was. “Legal
obligations” were important, State Department spokeswoman Jen Psaki said. It’s just that unspecified “national security
interests” were more important.

Left unmentioned were the financial interests at stake: If
the U.S. severs Egypt’s aid, it will be on the hook for billions
of dollars in U.S. military contracts meant for Egypt. And if
Egyptian aid is not renewed, U.S. military contractors will lose
an important client.

This situation emerges from Egypt’s privileged position
among U.S. aid recipients. Not only is Egypt one of the biggest
recipients of U.S. aid, receiving $1.55 billion annually, $1.3
billion of which goes to the military. What’s more, Egypt and
Israel alone are allowed to use something called cash-flow
financing to acquire defense goods and services from the U.S.
This enables them to make contracts for the future based on
expected aid. Egypt pays the U.S. for the goods out of its aid,
and the U.S. pays the contractors.

The U.S. won’t give an estimate for the total value of
outstanding contracts. A $2.5 billion deal with Lockheed Martin
Corp. (LMT) in 2010, however, is representative. The company agreed to
deliver 20 F-16 fighter jets to Egypt by December 2014. Through
June 30, it had delivered 14. Through April, the U.S. has
committed $797 million toward the contract, leaving it liable
for the remaining $1.7 billion.

The Obama administration announced last week that the
delivery of the next four F-16s would be delayed. Then came the
weekend of violence, with Egyptian authorities killing at least
74 pro-Mursi protesters -- some of whom, according to a report
by Human Rights Watch, were shot from above, in the head and
chest. This suggests the gunmen aimed to kill, rather than to
defend themselves or disperse the crowd.

Under such circumstances, the U.S. has no choice but to
suspend its aid to Egypt. Doing so would be extraordinarily
wasteful, as the U.S. would still have to pay the military
contractors. And if the Egyptian government continues to behave
in a way that makes the resumption of aid impossible, U.S.
military contractors could lose Egypt as a client.

The second concern shouldn’t be a driving force of U.S.
foreign policy. As for the first, it argues for eliminating
Egypt’s statutory access to cash-flow financing, which would
require the administration to work with Congress.

At this point in its history, Egypt is neither a stable
country nor a reliable ally. What the U.S. needs is both
flexibility and strength in its dealings with Egypt: that is,
the ability to suspend aid without worrying about contractual
obligations and the determination to use that ability to
encourage peaceful change.